Government investigating external contractor used by RBC for tech services

TORONTO – Controversy over the Royal Bank of Canada’s decision to outsource dozens of jobs continued to mount on Monday with the government launching an investigation and observers suggesting the company’s actions are part of an alarming trend facilitated by existing regulations.

At the heart of the controversy is a multinational company called iGate, which was contracted to provide certain technology services to RBC — a situation thought to affect 45 current employees in Toronto.

Government officials are now scrutinizing the application documents submitted by iGate in its case to bring in foreign workers to provide services to Canada’s largest bank.

“HRSDC officials are currently reviewing the labour market opinions submitted by iGate in great detail, based on apparent discrepancies between RBC’s public statement and information which has previously been provided to the government,” said Alyson Queen, a spokeswoman for Human Resources Minister Diane Finley.

To obtain permits for temporary foreign workers, companies need to show a Canadian cannot be found to do the work. iGate did not immediately respond to requests for comment.

RBC has maintained it had not hired temporary foreign workers to take over the duties of current employees, but it also said it was delegating certain services to an external company that brought in its own employees for training at the bank’s offices in Canada.

The bank (TSX:RY) said it recognized the impact such an arrangement has on its employees and added it was working on finding other positions for those whose jobs were being contracted out.

Observers analysing the situation said RBC’s actions were part of a bigger story.

“The Canadian government has been aggressively encouraging employers to use temporary foreign workers,” said University of Toronto professor Audrey Macklin, who specializes in immigration law.

According to Macklin, the government encourages companies to employ temporary foreign workers either directly or indirectly by processing their immigration documents faster and by allowing companies to pay them less than Canadians.

“In effect, the government of Canada subsidizes employers to the tune of five to 15 per cent of labour costs on the backs of temporary foreign workers and at the expense of Canadians,” said Macklin, adding that companies often turn to external suppliers to access a pool of temporary foreign workers.

The government has repeatedly said the Temporary Foreign Worker Program is only to fill “acute labour needs” when Canadians aren’t available for the work required.

But NDP Leader Tom Mulcair says the Conservatives have done nothing to stop a situation like RBC’s.

“We see the banks and other large companies with their lawyers setting up these systems where Canadians can be deprived of their livelihood,” he said Monday.

The rapid expansion of the temporary foreign worker program has raised concerns that Canadian companies are filling job vacancies with cheaper workers from overseas rather than actively finding Canadians to fill the jobs.

In 2012, there were more than 213,000 foreign workers in Canada, compared with over 160,000 immigrants who arrived under the federal skilled worker program.

What’s missing, said one immigration expert, is a breakdown of what jobs those temporary workers are holding, and for how long.

“If in fact one of the contributing factors to the exponential growth of the temporary foreign worker program has been workers who are coming to Canada for very short stage and returning to work for a third party, that, I think, really does undermine the very rationale for having a temporary foreign worker program in the first place,” said Queen’s University professor Sharryn Aiken.

The issue of outsourcing, however, is not a new one.

“Outsourcing is inevitable. The economics are so overwhelming it’s not going to go away,” said Rob Babin, a Ryerson University professor and outsourcing expert. “It’s important to know how to manage it and how to govern it and how to manage the relations with the outsource provider.”

Employers capitalizing on the benefits of global outsourcing need to ensure they take care of their employees at home if the practice is to work well, he said.

“It’s important for any organization that takes on outsourcing to be very sensitive to the needs of workers… That’s why it’s touched a nerve with so many Canadians.”

RBC has faced a firestorm of online reaction, with some Canadians even saying they closed their accounts with the bank on Monday.

One labour economist argued that some of that public anger was rooted in the fact that employers weren’t revising their wages to attract Canadian labour for certain positions.

“When the price of labour looks like it goes up, it looks like Canadian firms are just going offshore to get the labour they want,” said Lars Osber, an economics professor at Dalhousie University in Halifax.

“They’re not bothering to try the alternative of raising wages.”

In late February, RBC reported a first-quarter profit of $2.07 billion, or $1.36 per share, up from $1.86 billion, or $1.23 a share, a year ago. Its revenue grew to $7.91 billion, from $7.57 billion a year earlier.